In the World of the High Tech Redneck, the Graybeard is the old guy who earned his gray by making all the mistakes, and tries to keep the young 'uns from repeating them. Silicon Graybeard is my term for an old hardware engineer; a circuit designer. The focus of this blog is on doing things, from radio to home machine shops and making all kinds of things, along with comments from a retired radio engineer running from tech or science news to economics; from firearms to the world at large.

Monday, October 10, 2016

Financial Hurricanes Are Far Worse Than Matthew

I've always thought that hurricanes were a kind of disaster that's easy to live with. Every place has its natural disasters, and hurricane country seems to me to be a better place to live than tornado alley or earthquake country. I'm sure there are exceptions, but I've never experienced one, to the idea that hurricanes always give you tons of warning. I was watching Matthew for at least a week before we had to prepare. We could have picked up any needed supplies at least that far in advance. We could have put up our shutters last weekend if we wanted. By contrast, you know there's a tornado season if you live in tornado country, but you may get five minutes warning. With earthquakes, you know you're going to get one when things start moving. With a hurricane, there's no reason to play that common, last minute rush game. There's no reason to wait until the warning flags are up to go line up for plywood at Home Despot or wait for water at the grocery store; buy that stuff before hurricane season and put it aside. It's the lazy man's disaster in the sense that there's nothing that absolutely needs to be done by the time they post warnings. Everything can be done at your leisure in advance.

The fact is we're not going to get any more warnings than we've already gotten that the western economies are in the path of an approaching financial hurricane. Metaphorically, the hurricane warning flags are already flying. There will be no warning siren five minutes before the banks close, you'll just go to use your ATM card to buy gas or groceries and the store won't accept it or it will bounce when they try to process the transaction. Lots of us have had the experience of going to the gas station and finding we can't use the credit or debit card because "the machines are down". Ordinarily, you go to the next gas station down the road or wait until the machines start working. What happens when all of the networks go down; all of the machines go down? Nothing is available unless you have cash, and then sellers will ask whatever they want to ask. It will be the start of panic.

Two days before Matthew, people who live along the beach were told there was a mandatory evacuation coming the next day. Some people left early. I've heard of ATMs being out of money. What will happen if everyone hits their bank and they run out of cash?

You've probably heard a lot about the troubles at Deutsche Bank (example), but they're not the only big bank in trouble. When the next financial crisis occurs, it will be suddenly and without warning. It will almost certainly follow the collapse of a big bank like Deutsche Bank, which will be followed by a stock market dive. Almost no one would understand what caused it. Almost no one would be prepared for
it. No one would know how long it will last. No one will know what the world will
be like when it's over. It will be worldwide and inescapable.

Janet Yellen and her fellow central bankers would try to reassure us they understand everything, but they don't. The central banks have blown trillions of dollars into an equity bubble on Wall Street. Estimates go upwards from $30 Trillion dollars disappearing in a short period, like one week. But that's not the worst case possibility; if the bond market collapses it could take another $70 trillion with it. Sure, they can throw a few hundred billion dollars at that, but are they really crazy enough to try to digitize $30 Trillion? $70 Trillion? It has been speculated that the International Monetary Fund (IMF) will be the only group left in the world with any money: their Special Drawing Rights (SDRs) The problem is that SDRs aren't really money: they're more like a promissory note. They're a claim to currency held by an IMF member nation. What if they need more money than they can get? What if they need more money than the GDP of the planet?

I've beaten this horse for years here: the market is not fine, the economy is not fine, inflation is not the 2% the Fed claims and essentially every statistic you commonly come across is bogus. The Fed blew the bubble in the stock market and it is going to burst, like all bubbles do. Nothing has been done to fix the root cause of too much debt in the system, and we're reaching the point where the storm is getting ready to hit.

5 comments:

Things have certainly reached a point where those who "think" they are the most intelligent forego common sense in favor of new fangled schemes and computer models that are only ways to cheat the system and avoid their fiduciary responsibilities. No oversight. No accountability. No consequences for them. It is the common folk who lose everything while, like Hillary, they skate, as their is no "evidence" or "intent" that is provable. Whatever happened to "The Buck Stops Here" type of leadership and expectations for responsibility? The Justice System has been perverted. People cringe at a few crude words by someone they don't like but when many people's lives are destroyed as they are cheated, robbed, bilked out of live savings, well, no one gives a shit.

It's not so much that they don't give a shit about people being "cheated, robbed, bilked out of live saving", it's part of the plan. In that old saying, "if you're going to make an omelet, you have to break a few eggs", we're the eggs.

I've been gradually building up a pile of cash, but that won't mean anything if hyperinflation blows it away. I have a significant chunk in a couple of bank accounts that I'm going to turn into a large building next summer – it had better hold off until next summer, dammit!

Put your resources into infrastructure and supplies. If you can weather the storm for a few years, things should get better again (unless we're in a nuclear war by then).

If you have to choose between cash and supplies, physical supplies of things you normally use and things you are likely to need if the grid and normal consumer product availability go away. Not just food, but necessary medications, paper products (can you imagine life without TP?), soaps for bathing, clothes washing, ammunition, first aid and trauma bandaging, antiseptics, antibiotics, clothing (socks are incredibly important - ask any soldier), footwear, etc.

Cash can be - and _would_ be refused if we get hyperinflation or if the flow of goods to supermarkets, department stores gas stations, etc. _stops_. Would you give up food you have stored for cash, if that cash can't be used to either replace it or purchase something else you need? Even gold will be worthless unless you are dealing with someone who has an item is sufficient quantity to give up some of it for that gold and still have what he needs to get by. And barter could become very dangerous, if the knowledge that you can afford to trade certain items becomes common knowledge to someone prepared to take it from you by force.

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Retired radio engineer, follower of Christ, RF designer, mentor. Radio ham, home shop machinist, lapidary, silversmith, roadie cyclist, learning to be a rifleman, and home defender, - a guy with too many interests to keep track of.

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